Monthly Archives: September 2016

The economist John Maynard Keynes was one of the members of the British team charged with negotiating a peace treaty end World War I. After several months of frustration, he quit and in 1919 published a short book about it. In the book he warned about what he called Spartacism – a militaristic response by the Germans to the harsh terms imposed on them. Sure enough, soon after the war, the Germans were secretly re-arming themselves, although the world did not find out about it until the German pacifist Carl von Ossietsky revealed it in 1931. By then, Hitler was on the rise. In 1939 Hitler invaded Poland and soon after World War II began. As is well known, the war led to the loss of millions of lives.

This is all old news. What is not old news is that new forms of what Keynes called Spartacism are on the rise. They are not exactly the forms that resulted in Nazism and Fascism; after all, history doesn’t ever repeat itself. But the conditions so aptly described by Keynes have once again formed. This time it is not the inequitable terms of a peace treaty but the consequences of neoliberalism that are of concern.

Ironically, neoliberalism arose in response to the Nazi, Fascist and Communist regimes of the 1930s. Neoliberals were rightly concerned about the rise of various forms of Spartacism of their day. Among them were many well-known economists including F. A. Hayek, Milton Friedman, Gary Becker and James Buchanan. They argued that promoting markets would lead to greater freedom and liberty.

Starting in the late 1940s and growing in the 1970s, various forms of neoliberalism have been enthusiastically embraced by much of the corporate elite as a response to the rise of the welfare state in the immediate post-war period. Although they often disagree amongst themselves, neoliberals tend to agree that…

Human knowledge is always limited, but the market – an irrefutable logical model – will always provide us with accurate information with which to make decisions.

All institutions from government agencies to universities, from hospitals to private voluntary organizations must be made to fit the market model. Where markets cannot be formed, competitions must be organized instead.

Nation-states must be barred from intervening in markets by establishing international institutions (e.g., the World Trade Organization, the International Monetary Fund) that limit State power.

Each of us must be reconstructed as an isolated, autonomous, entrepreneurial self who constantly strives to build her/his human capital.

As a consequence of the neoliberal project, millions of relatively highly paid manufacturing workers have seen their jobs shift to nations with lower pay scales. The Great Recession of 2008 hardly helped the situation. When the recession ended, it became clear that such jobs would not be returning anytime soon if ever. While the top 1% and especially the top 0.1% have been doing fabulously well, those employed in manufacturing have seen their futures (and often the futures of their children) wiped out. They have been marginalized even as most mainstream economists have argued that they would find work in other sectors of the economy. The ‘lucky’ few who have found work elsewhere have discovered that they are earning far less than they once were in manufacturing.

Regardless of what one thinks of Donald Trump, there is no question that he hit on what the elites of both the right and the left had been missing – a growing frustration over talk of economic growth and the end of the recession that has simply left a huge portion of the working class behind even as it has benefited the very wealthy. This rather large segment of the US population (as well as the population of most European nations) is furious with the corporate elite and increasingly ready to listen to whoever claims to have a solution their problems.

Hence, we see the unexpected growth of support for Donald Trump in the United States, the Front National in France, the UK Independence Party in Britain, the Alternative für Deutschland in Germany, the Freiheitliche Partei Österreichs in Austria and of similar ‘populist’ parties elsewhere. They share many of the same objectives. They want to stop global trade, limit immigration, and return to some mythical past in which everything was wonderful. They believe that globalization has polluted the purity of the dominant culture by allowing persons with different ways of dressing, skin color, religion or other distinguishing features to freely immigrate. Indeed, they berate the existing governments for allowing this to happen. And, they claim – with little or no evidence to support it – that those immigrants have taken jobs from long term residents.

In addition, Hungary is now ruled by Viktor Orbán of the Fidesz party. He has made clear that he is an advocate of what he calls ‘illiberal democracy’ and he looks admiringly toward Russia. In Poland, Jarosław Kaczyński of the now ruling Law and Justice party has introduced restrictions on the judiciary and media, leading to numerous public protests. Both the Hungarian and Polish leaders are strongly opposed to immigration and see the European Union as destroying their national heritage.

At the same time, these movements rally behind their national flags. Indeed, they wrap themselves in the flag, claiming that only they are the true patriots, only they can stop the invasion of foreigners and the impending collapse of their nation.

Moreover, in some nations these groups have made clear their neo-fascist intentions. In Greece, the Golden Dawn party has been implicated in the deaths of immigrants. They celebrate the former dictator, Ioannis Metaxas, and they make use of Nazi symbolism. The Front Nationale of France has its roots in Nazi propaganda as well, although their current leader, Marine LePen, has worked hard to shed that image.

Here in the US, Donald Trump has frequently voiced his intentions to build a wall to keep out Mexican immigrants (who he defines as mostly criminals and rapists). He has called for a moratorium on entry into the United States by Muslims. He has managed to insult several war heroes despite his own lack of military experience. He has excused two men who beat up a Hispanic man in his name by noting that his followers are very passionate. He has refused to disavow the support given to him by the white supremacist and former Klan leader, David Duke. At the same time, he claims that he will bring back high paying manufacturing jobs, withdraw from or renegotiate numerous international agreements covering both trade and defense. He has called for the Russians to increase their cyberattacks on the Democratic Party so as to reveal other allegedly embarrassing statements. He has even praised Vladimir Putin’s presidency of Russia. Mr. Trump’s speech and actions have emboldened a wide range of fringe groups that represent a threat to American democracy. These include white supremacists, racists, hate groups of various kinds as well as individuals who simply have a grudge.

Importantly, Mr. Trump’s claim that he will bring back manufacturing jobs is simply a pipe-dream. Let us assume that he was successful in requiring all American firms to manufacture their goods here in the United States. There would be two immediate consequences: First, those companies would invest in as much automation as possible so as to minimize the number of people they needed to hire. Second, the prices of those items that could not be produced by automated equipment would soar, leading to a rapid decline in demand for them.

One need only look at the automobile industry to see how this has worked without Trump’s proposed policies. There are still automobile assembly plants in the US, but they employ only a small fraction of the numbers of people they once did. Robots and other automated equipment do most of the work, while highly skilled technicians make sure that the equipment keeps running.

The same is true when one looks at coal mining. Many minors falsely believe that it is government policies that have reduced the demand for coal. Indeed, numerous large mining companies have fallen into bankruptcy over the last several years. But this is largely due to the availability of cheap, cleaner burning natural gas as well as the rapid decline in the cost of solar and wind energy. Put differently, coal is not only bad for the environment; it is now more expensive that alternative fuels. No policy, short of taxing all other forms of energy, is going to bring back the age of coal.

But the key to all this is not to bring back an imagined past. Nor is it to assume – as far too many economists do – that those workers who can no longer find jobs in manufacturing or mining will simply find other jobs. In the past, when much assembly line work and machine tending was similar from one industry to another, unemployed workers could find jobs in other industries. This is not to suggest that such changes were not wrenching for the workers involved. It is to say that the shift in employment was relatively fast. But today, this is not happening.

However, there are two solutions to this problem that could be implemented immediately. First, it is well known that the information technology industry is having difficulty finding employees who are properly trained. Government-supported re-training programs (perhaps at community colleges) could be created that would help unemployed miners and manufacturing workers to fill those positions. Of course, some of these workers would have difficulty in those courses, but it is a mistake to think that those workers are all dumb. Most are not. Given the opportunity, they will rise to the occasion.

Second, as I argue in more detail in my book, we could and should enact a Basic Income Guarantee (BIG). We are a sufficiently wealthy society to guarantee every individual a BIG that is large enough to allow everyone a measure of security. It could be funded by eliminating most forms of welfare and by collecting the billions (perhaps trillions) that are not collected by our ‘leaky’ tax system. Such a BIG would promote new forms of creativity, permit millions of persons to further their education, make households more secure and eliminate our tendency to blame those at the bottom of the income ladder for their alleged failure to achieve the American Dream.

Moreover, doing this would largely eliminate the threat of Spartacism. It would demonstrate that American democracy is not merely for the elites and upper middle class but for everyone. It would provide security to all, thereby eliminating much – perhaps most – of the support for ending immigration and closing the borders to trade. The time to do this is now, before our democracy is ripped apart by groups no one other than a dictator of some sort can control.